Superannuation Alert 23.7.14
Financial Services eBulletin - 23 July 2014
The Lander & Rogers Superannuation Alert is a brief overview of new developments in the superannuation industry.
- On 15 July 2014, the Interim Report of the Murray Financial System Inquiry was released. The Interim Report makes several observations on the Australian financial system and suggests future policy options. The report indicated that Australia's financial system has generally performed well. Some of the key observations in the Interim Report include:
- The lack of strong fee based competition in the superannuation sector has indicated that there is opportunity for further efficiencies in the superannuation system. A comparison with international standards has shown Australian operating fees and costs are above average.
- There is consumer demand for affordable comprehensive advice. A focus on removing the impact of conflicted remuneration and improving the quality of advisers will be beneficial for consumers.
- Existing disclosure requirements produce complex and lengthy documents that impose significant costs on the industry without enhancing consumer understanding of financial products.
- Restoring the general prohibition on direct leverage of superannuation funds should be considered.
- The retirement phase of superannuation does not meet the risk management needs of many retirees and remains underdeveloped.
- There is an absence of a shared philosophy and set of objectives for superannuation.
Feedback is being sought on the Inquiry's observations by 26 August 2014 for inclusion in the final report which is due in November.
- On 15 July 2014, a motion for the disallowance of the Corporations Amendment (Streamlining Future of Financial Advice) Regulation 2014 was defeated in the Senate. However, the Government has announced that it will make further regulations within 90 days to ensure certain requirements in the Corporations Act 2001 (Cth) are explicitly listed in the Statement of Advice provided by financial advisers to their client:
- that the adviser is required to act in the best interest of their client and prioritise their client's interests ahead of their own;
- that any fees will be disclosed and that the adviser will provide a fee disclosure statement annually;
- that a client has the right to return financial products under a 14-day cooling-off period; and
- that a client has the right to change his or her instructions to their adviser.
- On 16 July 2014, ASIC Commissioner Greg Tanzer expressed ASIC's concern about the advice SMSFs have been given to invest in property. Mr Tanzer said he was that the promoters that are recommending that SMSFs invest in property are not complying with the law. He said many may not realise that they may be carrying on a business of providing financial product advice without the required licence. ASIC is now working with businesses suspected of engaging in unlicensed conduct to help them understand their obligations.
- On 17 July 2014, the Minerals Resource Rent Tax Repeal and Other Measures Bill 2013 [No 2] concluded debated in the Senate. The government proposes to amend the Bill to alter the timetable for increasing the superannuation guarantee rate to 12% gradually until 2022.
- On 17 July 2014, Acting Assistant Treasurer Senator Cormann, announced that the Government is progressing in establishing an "enhanced public register of financial advisers". A dedicated industry working group will consult with all relevant stakeholders to determine the appropriate mechanism for establishing the register. The working group will consider:
- the scope and content of the register;
- whether licensees and advisers will be subject to reporting obligations;
- who provides information and input of data; and
- potential privacy issues.
- On 18 July 2014, the ATO released ID 2014/23 Self Managed Superannuation Fund - Loan to a property trust. The decision provides guidance on whether a loan from a SMSF to a property trust is to be treated as an in-house asset.
- On 18 July 2014, the ATO released ID 2014/22 Death benefits dependant - adult child caring for terminally ill parent. The decision provides guidance on whether a taxpayer who is a child beneficiary over 18 years of age can be a 'death benefits dependant' of the deceased for the purposes of section 302-195 of the Income Tax Assessment Act 1997.
- The Centre for International Finance and Regulation has released The Superannuation System and its Regulation: Views from Fund Executives dated July 2014. The report summarises the survey reports of 28 superannuation fund executives and suggests the following areas of concern:
- focus on short-term performance;
- undue focus on fees and costs;
- regulatory change and uncertainty; and
- the need for more focus on the retirement phase by both industry and regulators.
All information on this site is of a general nature only and is not intended to be relied upon as, nor to be a substitute for, specific legal professional advice. No responsibility for the loss occasioned to any person acting on or refraining from action as a result of any material published can be accepted.